Ch. 8-10: Test #3-PFIN

14. A grace period permits the policy holder to retain insurance even though the premium has not been paid for:

• 31 days

1. The principle of indemnity would prevent:

• An insured from collecting more than he or she lost

8. The single most valuable technique in personal risk management to assist an individual in determining how much life insurance is needed is:

• Assessing the family's total economic needs and subtracting the financial resources available to meet those needs

44. Comprehensive automobile coverage refers to:

• Complete coverage including liability, medical payments, and damage to the automobile

11. If a term life insurance is convertible, the policy can be:

• Converted to a comparable whole life policy

45. A personal liability umbrella policy typically includes:

• Coverage for auto related liability losses in excess of the limits purchased in the automobile insurance.

46. Insurance is a tool that can reduce _____ risk

• Economic

31. Negligence results when someone:

• Fails to act as a "responsible person"

5. The primary purpose of life insurance is to provide

• Financial security for dependents in the event of death

13. Employers often provide _____ life insurance as a fringe benefit for their employees.

• Group

34. Which homeowners' policy is best suited for a renter of an apartment?

• HO-4

21. During the past few decades, the percentage of our income spent on health care:

• Has increased due to an aging U.S. population

36. Section I of the homeowner's insurance policy covers:

• Hospitalization cost provided to the insured

23. Which of the following is true of the health care industry

• In a traditional indemnity plan, the premium cost is low if it is a high-deductible plan

4. The probability of a loss occurring can be reduced by ______

• Loss prevention

38. A higher home insurance cost may result from

• Low credit scores of the insured

24. Group health insurance premiums are ______

• Lower than individual health insurance premiums

26. Which of the following programs is a public assistance program that provides health insurance benefits only to those who are unable to pay for healthcare?

• Medicaid

49. Workers' compensation insurance would make compensation payments to an injured worker ____

• Only if he had been hurt on the job

10. Term life insurance is characterized by ____

• Premium amounts related to age

1. The basic purpose of insurance is to _____

• Protect yourself from economic losses

35. A personal property floater

• Provides coverage for items of expensive personal property not adequately covered under the standard homeowner's policy

40. Donna, who is single and 30-years-old, has received several speeding tickets recently and was shocked by the effect they had on her auto insurance. Donna drives a 2002 Pontiac Firebird. She is currently not covered by health insurance, has an emergency fund of $25,000, an income of $100,000 per year, and an investment portfolio of $230,000. She is trying to reduce the price of her auto insurance. Which of the following actions is most likely to help Donna reduce the price of her auto insurance

• Raising her deductible from $250 to $1,000

2. The purchase of insurance is a common form of _____ by the insured.

• Risk transfer

50. Funds for Medicare benefits come from:

• Social Security taxes paid by covered workers and their employers

41. A homeowner's policy does not provide protection for the personal property of:

• Tenants

37. Section II of the homeowner's insurance contract covers:

• The cost of defending the insured

39. Replacement cost coverage is the reimbursement of

• The cost of repairing or replacing damaged structures without deducting physical depreciation

28. Long-term care is a term used to describe _____

• The delivery of medical care to persons with chronic medical conditions in a nursing home

9. Identify a true statement about the multiple-of-earnings method

• The multiple-of-earnings method considers the insurance coverage to be a 5 to 10 times the annual income

43. Liability coverage provides payment to:

• The non-family member involved in the accident

3. Insurance underwriting is best described as:

• The process used by insurers to decide who can be insured and to determine applicable rates that will be charged for premiums

6. Actuarial date is used to measure

• The risk of loss for a population

27. Employees should consider risk assumption for certain health risks as:

• They are required to pay additional insurance premium to cover the lapse of insurance coverage for them

25. One of the key goals of the Affordable Health Care Act of 2010 is _____

• To reduce the number of uninsured citizens in the country

48. From the standpoint of the person buying insurance, the central purpose of insurance should be

• To transfer risks of serious loses

17. You would have a better chance of choosing your own doctor with a PPO than with an HMO.

• True

18. A preferred provider organization has characteristics of both individual practice association (IPA) and on indemnity plan.

• True

19. Generally, insurance is more reasonably priced through group plans than as individual policies.

• True

20. Living a healthy lifestyle is an example of loss prevention and control.

• True

47. A house with a replacement value of $110,000 is currently insured for $90,000. The house has suffered a $15,000 loss from windstorm damage. The insurance company will pay the full $15,000 less the deductible

• True

29. In order to qualify for disability insurance under social security, a person must be:

• Unable to carry out the duties of any job

30. Dependent children will usually be covered under your health insurance

• Up to age 26

12. Henry must make set premium payments on his insurance policy until he dies, and if he cancels the policy, he will receive the cash value. His plan is a _____ plan

• Whole life

22. Which of the following is true of the workers' compensation insurance?

• Workers' compensation insurance compensates workers who are injured on the job or become ill through work-related causes

33. A liability suit could result against you when

• Your dog bites the neighbor

15. Non-forfeiture rights guarantee that a policy owner will not lose his or her _____

• cash value

16. Advances in medical technology, drug prescription, and treatments have substantially reduced the cost of health care in recent decades

• false

7. ______ is an activity that reduces the chance that a loss will occur

• loss control

42. Auto insurance is needed primarily:

As protection against potential liability claims